James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP?s Supply Chain Quarterly and a staff writer for DC Velocity.
When it comes to setting up a control tower to obtain visibility into the supply chain, companies don't have to go it alone. Third-party logistics service providers (3PLs) offer an alternative to establishing and running their own systems.
For those unfamiliar with the term, a control tower is an information technology system that allows a company to monitor and manage its carriers, logistics service providers, and suppliers. "Control towers are a great tool ... to ensure raw materials and end products are moved in a timely fashion to factories, to distribution centers, and to the end customer," says Alejandro Gonzalez Magán, senior director of customer service at DHL Global Forwarding, Americas.
Essential to a control tower's operation is the implementation of an "information hub" that connects a company to its suppliers and carriers. Although a shipper can buy software to do the job, it would then face the task of forging electronic links with all of its supply chain partners and managing the integration between disparate information systems. Because in many cases, a 3PL has already established many of those communication links, the company can simply ride the coattails of its service provider.
"A 3PL will have implemented these technology solutions multiple times over, so we have the framework of a process in place," says Dave Belter, vice president of transportation management at Ryder System Inc. "With the base process already there, we can [just] make configuration changes for the customer."
In addition to providing a technology platform, the 3PL can handle the day-to-day operation of the tower, freeing the customer to focus on strategic issues. "We do see that most of the shippers like the idea of retaining control of their strategy but outsourcing the execution," says Jordan Kass, vice president of management services at C.H. Robinson's TMC division.
MANAGING COMPLEX GLOBAL SUPPLY CHAINS
Control towers first emerged in Europe in the late 1990s. They evolved from managed transportation programs, where 3PLs oversaw the movements of multiple carriers for a shipper client. When 3PLs began managing orders and inventory along with carrier movements, those programs became known as control towers, says Terry Haber, senior vice president of solutions design/business development for Netherlands-based Ceva Logistics.
Multinational companies turned to the use of control towers as a way to manage complex global supply chains. Industry verticals in which control towers are being used today include automotive, aerospace, electronics, paper, food and beverage, and industrial manufacturing.
For the most part, control towers remain the province of large international shippers, which use them to oversee far-flung supply chains across continents. However, Haber has recently seen organizations setting up towers for specific regions, such as Asia. "Now that people are making in a region and selling in a region, we are seeing a trend with regional control towers as part of a global network," he says.
Even so, their use is still far from universal. Only 12 percent of respondents to a recent DC Velocity reader survey said they were operating a control tower or "command center," another name for this type of technology. When those respondents were asked what they used their tower for, 86 percent said it was to manage carriers, while 48 said it was to manage suppliers.
SETTING UP A CONTROL TOWER
Not surprisingly, setting up a control tower takes some prep work on the 3PL's part. "A customer's requirements need to be captured in detail and in depth, and properly documented with process flow maps," says Gonzalez Magán. "Service-level agreements, standard operating procedures, work instructions, and varied systems need to be set up."
The contract logistics service provider generally dedicates staff to the client when setting up a control tower. These staffers can then take delivery requests, tender loads to carriers, track shipments, and ensure that schedules are met to maintain supply chain flow.
Besides providing pipeline management, the tower can usually assist in benchmarking carrier and supplier performance. "The customer gets exception reports on how suppliers or 3PLs are performing," says Haber. Other services that a control tower can offer clients include assistance with future scenario planning and supply chain modeling, says Joe Carlier, senior vice president of global sales at Penske Logistics.
One of the biggest advantages of a control tower is its ability to react to changing events and take corrective action. If, say, a hurricane or tsunami jeopardizes a supplier's ability to fill an order, the control tower can reroute the shipment or locate an alternative supplier. "If somebody is going to have a disruption, you can make a decision to redirect through a control tower," says Haber.
FREIGHT-SAVINGS PAYOFF
Because of the work involved in setting up a control tower, 3PLs generally require multiyear commitments from clients. Shippers usually pay for the service on a transaction basis, as a subscription service, or a combination of the two.
As for the payoff, companies typically see savings in transportation costs—a result of efficiencies related to centralizing logistics operations in the tower. Kass says that for a "mature" shipper, a control tower can result in transportation savings of 5 to 10 percent, while a company that's never used a transportation management system (TMS) and centralized its logistics operations could realize savings of 15 to 25 percent.
Haber offers a more modest estimate of the potential transportation savings. He says an "undisciplined" company could net a 12- to 15-percent savings from a control tower. If a company has been doing a good job with its transportation program, however, then the freight savings would drop to between 1 and 3 percent.
Although freight savings can justify the investment, most companies electing to set up a control tower do so as a way to keep better tabs on their supply chain. "Customers ... see control towers as a value-added service to simplify managing complex supply chain logistics," says Gonzalez Magán. "Due to this complexity, it minimizes the risk of not having products on time to end customers."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.